It's kind of heartening that investors aren't buying this BS.
It is BS. I think SB Energy is like the perfect example. Here is this sort of declining solar business that decided now we're going to get into data centers. They say that they have all these data centers except they don't have any data centers. They have zero data centers that are operating. As you said, 9% are under construction. The other more than 90% haven't even broken ground. They keep on talking about this multi-hundred billion dollar revenue backlog. But then you kind of dig in and you realize, hold on, none of this is actually going to materialize within the next two, five, even 10 years. And then you start to realize this thing doesn't make any sense, especially at $50 billion.
Today's number 40. That's the percentage of global container exports that come from China. Ed, this morning I decided to play Frisbee with my youngest, and it kept getting bigger and bigger, and I couldn't figure out why. And then it hit me.
It's kind of cute, right? It's kind of cute.
Does it make you want to have kids?
Absolutely. I can see it now. Frisbee in the backyard, playing catch. I'm already very excited.
Yeah. Them screaming I hate you and not coming home and you're up late worried. Yeah, that's part of it, too. Just so you know, Richie, just so you know.
Oh, damn. Okay. It's not what they advertised.
I'm having such a nice time. My son, as you've probably heard, is a freshman at college, and I call him every day to relive college. I'm having such a... I'm back at college.
You're calling him every day. Let's ease up on that.
I speak to both my sons every day.
Wow. And maybe I just don't speak to my parents enough or didn't speak to my parents enough.
So, I think what you're saying is your parents didn't give you enough love.
No, it's kind of my... I think of it as my... I do it for a couple... Well, I'm purchasing right now, but it's good. I think it's more for me. It lowers my blood pressure to hear my boys' voices, but I think that, yeah, I think it's good for both of us.
You're probably right. I'm probably being quite unfair.
And it's not like a long drawn out conversation where I give them a lesson about interpreting Odyssey for their life. It's, hey, what'd you do today? How'd you do on the biology test? You're not working. I'm paying for everything you need to do better. And then, you know, who are they playing this weekend? What's going on? All right. Have a good rest of the night. I love you. As long as it's quick and crisp.
Yeah, you're right. Because actually, I think one of my problems with my conversations with my parents is we don't talk for a while and then each phone call, you know, it's going to be like a 30 to 45 minute thing because there's so much context that you got to catch them up on. So, yeah, maybe that's the solution. Just sort of like a one minute check-in daily. It sounds like a lot though, but maybe it's good.
Oh, it's such a good hack. It's pick up the phone. What's going on? What are you doing? It's like an anchor for me emotionally and mentally just hearing their voice quick. And occasionally they don't answer. So, I just call back like an obsessive girlfriend. I'm like, there's no hiding from the dog. There's no hiding from the dog. And then I start texting them and I'm like, you know, I haven't paid your tuition yet. Pick up the phone.
Do you schedule the phone calls or are you just spontaneous?
I try and do it around the same time so I know that they're free. I try and do it kind of like a little bit before bedtime, sort of as a... I like the idea that our conversations are the last things they do. But you know, my dad had a similar practice with me. On the dot every Winter Olympics, he would check in.
That's good. He was consistent.
Every four years. Win. How are you doing, you oatmeal savage? Who is this? Dad.
Dad. I like that. Every four years. Maybe there's a happy medium here.
No matter what. Well, I was judging at the beginning, but I think you've turned me. I think you're right on this. I think every day is good. I think it's healthy. Quick, brief check-ins. I like it. If you wanted to do something, especially if you're a mom, just call her every day for 30 days and freak her out. She won't know what's going on. Hey, just checking in. Hey, just checking in.
I'm at that age now where I'm so anxious when my friends call me. I'm literally like I pick up and I'm like, who's dead? But no, just I would love actually this would be a great experiment. Hopefully, I imagine your parents sound like really bright and interesting and discerning, so I doubt they listen to this podcast. But I would love an experiment. Call your mom 7 days straight and don't, you know, don't... What's up? Oh, nothing. I just wanted to check in. Do that seven days straight and then report back.
Yeah, I think it's a good idea. Now I'm feeling bad about how often I call my parents, but that's probably a good thing.
Well, it's not like they gave you life. I totally flipped now that I'm the parent. I guilt trip.
I think it's good. I think a little bit of guilt is probably pretty healthy.
All right, let's talk about data centers.
Let's do it. We got a lot to get into here. The data center buildout is starting to make Wall Street anxious. Last week, Oracle sent a force majeure notice to the developer of its data center project. The company wants the option to delay payments if the data center is not operational by 2028. That news sent Oracle stock down 5%.
Meanwhile, several other companies tied to the data center industry have delayed their planned IPOs. One of them is SB Energy, which was supposed to go public this month, but according to the New York Times, its bankers couldn't find enough buyers at the company's targeted valuation of $50 billion. The company is reportedly waiting to go public until investor sentiment towards data centers improves. And it's not alone. WholeTech Nuclear is also postponing its IPO indefinitely. And Agrico, I think I'm pronouncing that correctly, is delaying its own timeline. So Scott, a lot of issues in data center land. We have SB Energy, which is quite literally a data center company by definition. Was supposed to go public. It's now delaying that. We will get into that in a moment. WholeTech Nuclear, this services company that also delayed, and according to the CEO, it's because the business is, quote, viewed as connected to data centers. Agrico, which is this generation company, also services data centers, also delaying. And then the big news, Oracle sending a notice to the developers of Project Jupiter, one of its biggest data center projects, and they cited what is known as this force majeure, which is essentially this legal maneuver that is designed to relieve you from any liability, any obligation if some event happens that would prevent you from fulfilling your agreement. And a lot of people, I think, are correctly interpreting that as Oracle isn't sure that this whole data center buildout is actually going to work out. So what happened? Oracle stock falls 5%. Blue Owl, and those are the guys that are financing the development of this data center, that stock fell 7%. So a lot of risks to the data centers, a lot of delays, a lot of red flags. What do you make of this?
The only edit I would have is I think force majeure is like force of god, like something like an earthquake or a war, right, where you have a legitimate reason to say, okay, this is just not normal business standard operating procedure and I should have an out here. So the framing here or the question is, is SB Energy the canary in the coal mine? And I would argue that it's the canary asking for a $50 billion valuation on a mine that hasn't even been dug yet. And if Anthropic and OpenAI are having to delay their IPOs, there's just a ton of second-tier septic tank AI.com AI, you know, pretending jazz hands AI companies that are not going to get out. And this company had no business going public. Let's just talk about the numbers here. 214 million in revenue down 8%. So that's, I'm sorry, at 50 billion. They wanted to go out at 234 sales for a company that's revenues are declining. Zero operating AI data centers. This is just ridiculous. This is, and I love that the markets are just gag on this thing. Only about 9% of contracted capacity is under construction. Essentially what they're trying to do here is they're trying to get a $50 billion valuation on a PowerPoint with a SoftBank logo. And if you compare it to, I think the closest comp would be solar. It's worth about 1.2 billion. So credit to them for Adam Neumann-like salesmanship, trying to elevate the world's consciousness or decrease it enough such that they could fool people into paying 234 times sales for a company that's declining.
The bigger story and the more important story is this kind of quote-unquote Oracle's force majeure. That's an act of God clause. And when Oracle invokes force majeure, what they're really saying is that the god is credit markets. This isn't an existential event. This is the market saying you're out over your skis. And this might be the dark fiber of the cycle in the dot buildout. Telecoms laid tens of millions of miles of fiber, you went around, but this is generally what happened. B2C, pets.com, oh wait, that's not working. Oh wait, B2B, internet capital, wait, that's not working. Well, I believe in the internet, so just invest in the infrastructure, invest in the steel in the ground, and all this money piled into Global Crossing and Cisco and those things lost, if they didn't go bankrupt, lost 90% of its value. And it wasn't that the fiber wasn't wrong. It was just early. And it's the definition of wrong when it goes on a balance sheet. The physical world is the real friction risk here. And that is 45 projects where 68 billion dollars were blocked or delayed in three months. And 30 to 50% of this year's capacity is facing delays. One of the most powerful entities in this AI story right now is a senior citizen who's angry and doesn't have a lot, you know, has a lot of time showing up at a town hall. So the IPO window is telling. Private markets lie and public markets don't. Private markets can have stupid marks. Public markets have granular marks and will say, no, we're not buying this. We're not going to let you wave your AI hands over this and turn this chicken shit into chicken salad. And when the bankers can't find a book, it means the smart money has stopped buying the story and wants to see actual progress. The K-shaped economy is a decent metaphor for AI right now or the AI trade, and that is one has cash flow like Nvidia and the hyperscalers, and the other has quote-unquote potential like SB Energy, WholeTech, the Neoclouds, and the second group is about to get very familiar with the term cost of capital.
Yeah, it's kind of heartening that investors aren't buying this BS. Agree. I like this.
It is BS. I think SB Energy is like the perfect example. Here is this sort of declining solar business that decided now we're going to get into data centers. They say that they have all these data centers except they don't have any data centers. They have zero data centers that are operating. As you said, 9% are under construction. The other more than 90% haven't even broken ground. They keep on talking about this multi-hundred billion dollar revenue backlog, but then you kind of dig in and you realize, hold on, none of this is actually going to materialize within the next two, five, even 10 years. And then you start to realize this thing doesn't make any sense, especially at $50 billion. And that is the problem. It's like, okay, your business is a nascent business. It's very speculative. There's a lot of risk. Let's see that reflected in your price. But they refuse to do that. They say, no, we're worth $50 billion. We're worth more than 230 times sales. We're going to go out and we're going to do this thing. And you hope that people look at it and go, no, thank you. This doesn't make any sense. And that is exactly what happened. They were rejected clearly when they tried to shop this thing around on Wall Street. And it seems like investors are kind of understanding what the BS here actually is and what to look for. And we're seeing it across the board here. We're seeing it with all of these other companies. It might be what we're seeing in terms of the OpenAI delay. I mean, it's not totally clear why they're delaying. We know that Sam Altman said that he didn't think that it was the right time, but I think probably what he's realized is we're in an era where investors are actually quite discerning at this point. They're not just going to gobble up your BS no matter what. And I think there are multiple dynamics here that are playing into this data center buildout risk. One of them is more of a technical risk, which is I would say that constructing these things is actually quite difficult and financing these things is quite difficult because the input prices are very volatile. You have the price of memory and the price of energy and the price of GPUs and liquid natural gas, and these are all multi-year projects that can basically be terminated if they're late by even a year. So that's already a difficult thing to deal with, and it seems like a lot of data center companies are just pretending that that risk doesn't exist. Then you also have, as you point out, this demand-supply problem, which is that similar to 1999, we actually don't know what the demand will look like. A lot of people are just saying stuff. They're putting their PowerPoint decks together. They say demand's going to go like this. We're going to have huge CAGR. It's going to be incredible. But of course, no one actually knows. And there is a high likelihood, a high probability that we will overbuild. We'll have too much supply, and then suddenly you won't be able to charge the lease rates that they're charging today. And suddenly the economics don't make sense. That needs to be recognized. And then the third thing I think is the most important, which you mentioned, is that America hates this stuff. Just flat out. 70% of Americans oppose a data center in their neighborhood. This is becoming the issue. It's becoming almost like the midterms are a referendum on AI. Every politician needs to have an AI strategy. And it seems like most of them are just going in a direction of it's bad. I'm going to be against it. I think that, I mean, maybe the exception would be the president. He's been very pro-AI, but clearly this is going to be a problem. And I just want to point you to a quote from the CEO of CoreWeave, which is another one of these Neocloud companies. And to me, this really encapsulates... Mia found this quote. This really encapsulates the problem here. He said on the Q2 earnings call, he said, quote, we feel like moratoriums are not going to impact the demand for this infrastructure, which to me is like a massive vote of no confidence because clearly this has become a problem that is too large to ignore. And yet a lot of these leaders of these data center companies are ignoring it. They're saying it's not a problem. AI is going to be great. The moratoriums won't be a problem. Clearly, this is something that needs to be actually addressed. And if you want to inspire the confidence of Wall Street, then you need to acknowledge the elephant in the room and explain and lay out exactly how you're going to address it. I don't think these companies are doing that. And I think that is why they're getting punished when they try to go to Wall Street and they try to take these things public.
The question is, is this the beginning of the correction or just a bump in the road? Like this company trying to get public and not being able to get public, which is a good thing. And then people just highlighting how ridiculous some of this shit is. It feels very '99 to me. It feels very when we looked at some of this stuff and said, okay, this just doesn't make sense. That felt like a key component of pre-stage crash that finally the market says, no, no, this is, you know, even we aren't this stupid.
Yeah. Part of me wonders though, is that a bearish signal or is it perhaps even a bullish signal because it might say that we're in a healthy market where the skepticism is now being priced in. And I'm actually not sure where I stand on this, but one thing that I've been looking at, which I think is quite interesting, is Nvidia's valuation right now. And Bloomberg just wrote a whole article on this, which I thought was very good, pointing out that on a forward earnings basis, Nvidia is trading at 17 times earnings, which is its lowest level in more than a decade. It's down from 32 in 2025. That's just wild. So, I can't tell. I mean, I think there are a lot of things in that price. I think that what we're seeing priced in is the fact that Nvidia has been the largest player in terms of GPUs and now they have a lot of competition and Google's building chips and Amazon's building chips and all these companies are also competing with them and so it seems as though their moats are beginning to narrow. But I also wonder if we're starting to see the skepticism priced in to the broader market. And I'm not sure. I keep going back and forth on this because I'd kind of want to see it come down a little bit more. I mean, if we look at the trailing PE, it's a little bit of a different story. But, you know, still similar. The trailing PE is down to 28 times earnings. I mean, it's down from 50 last year. But that's still higher than the S&P, which you'd expect for a company like Nvidia. But I think that there is a question here of to what extent are investors pricing this into the most important and systemic stocks in the AI trade. And Nvidia to me is the metaphor for the AI trade and on a multiple basis it's trading down and the earnings are rising way faster than the stock itself. So I don't know, do you have any views on that? I'm personally a little torn. I was thinking maybe this is a buy, but I don't know if I'm there yet.
Josh Brown is, you know, he said Nvidia's... I think Nvidia has been the best thing that happened to Ritholtz Wealth Management. And to Josh's credit, I think he was in it really early and it's, you know, yeah, it was one of his big calls. He's up like 10,000% on it. You know, the PE ratio looks... it makes the stock look cheap. The problem is certainty around those earnings.
Yes. Because you have a company that seems to be engaging in a lot of kind of seller financing and circular deals and it feels like the first place as people... if the unbelievable expectations around the business required to justify this capex doesn't keep, you know, doubling every 60 or 90 days, it's logical to think that people will scale back their capex and that the tip of the spear that really feels that pullback would be Nvidia. At the same time, if you were going to do a play in the AI space, I'm not even sure I would do a basket of AI because I feel like there's so much crap in it right now. It's like when I talk about buying a basket of Chinese stocks and Ed says, don't do that because there's so much crap. You do need to be a stock picker. It does feel like Nvidia is Manhattan real estate and that is in good times it goes up 20% and bad times it goes down eight. It's just not... It feels like Nvidia is a safer play. And to your point, I mean, is Nvidia like Facebook or Meta where it has all these existential risks, but we all wish we bought in when it was trading at these multiples of earnings, right? So the honest answer is I don't know. But to your point, if I were going to put money into the AI trade, and I haven't, and I'm just furious because I'm one of these guys who missed the whole thing and kept saying it's too expensive, it's a bubble, and then it triples. That feels like going to Malibu beachfront real estate, which is, you know, they're the class of the whole thing. They're ground zero of this, and it's well-run. Jensen is a great promoter. He comes across as somewhat earnest as he tries to convince us that it's in our best interest to sell China our most advanced GPUs, which in my opinion makes absolutely no sense. But I'm sympathetic to the notion that there might be... you can see Nvidia doubling from a PE perspective. The question is can you imagine an eight or a ten trillion dollar company. Right. So, but I agree with your sentiments that if you were going to put fresh capital into the public markets because you don't have access to the private markets, it does feel... I don't want to call it cheap, but less insane than some of this other crap.
Yeah. I mean, if you were trying to get into the AI trade and you had a choice between investing in Nvidia here or investing in like the Anthropic IPO at 2 trillion or whatever the number is going to be for the OpenAI IPO, to me, I'd say this is your pick hands down because it has gotten somewhat punished. I mean, I think this goes to what we've been saying about where the bubble actually is. This is not a comprehensive bubble that is afflicting the entirety of the market. The bubble seems to be... there seem to be multiple bubbles in little pockets of the market including I would say the private markets especially OpenAI. Granted we'll see when they go out to the public markets and as you've said the public markets are a lot more discerning than the private markets. In a lot of ways, you'd say that the public markets are the smart money compared to the private markets, which might be the dumb money, which will just eat anything up. But I do think that that's going to be the dynamic to watch. And you also brought up the durability of forward earnings, the credibility of forward earnings. That to me is a really big question. I feel like we take forward earnings as a given. We just assume that it always happens and that we should trust it. But I think with numbers this large and when you do have Oracle going to its largest developer and saying like, hey, if something happens, just count us out, please. And what actually is the definition of an extraordinary exogenous event? Yeah. It could be like an earthquake, could be a pandemic or as you say could be related to their credit rating. Could be something that actually is not that extraordinary given the circumstances that we're seeing financially with the company. When you have all of that, that really calls into question the credibility of the earnings that we're supposed to see in the future. And so I think that there's a lot of uncertainty with this right now. A lot of risk, but it might be priced in. Investors might... that might be why the multiples come down so significantly. But it's definitely a toss-up and it's really interesting.
We'll be right back after the break. And if you're enjoying the show so far, send it to a friend and please follow us on YouTube, Spotify, or wherever you get your podcasts.
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We're back with Prof G Markets. There has always been one company that seemed destined to win the streaming wars, and that company is Netflix. But this year, that certainty has faded. Netflix stock is down more than 40% over the past year, and the company just received two analyst downgrades within a week. Both analysts said growing competition from YouTube and declining engagement were weighing on the stock. Meanwhile, Disney Plus and Hulu are raising their prices for the fourth time in four years. The biggest increase will be to the ad-free tiers, which will cost 13% more than they did last year. It's the latest example of what people are calling streamflation as streaming services continue to raise prices while consumers have more options than ever. So, Scott, Netflix has gotten crushed, down more than 40% in the past year, down more than 20% year to date. It just received two downgrades on Wall Street in the span of a week. Wells Fargo cut its price target to 57. It's at 71 right now. HSBC cut it to 76. So actually, that's a hold, but they still cut. This has been a disastrous 2026 for Netflix. And of course, this is happening while Paramount has just settled and essentially has gotten the green light to go ahead and acquire Warner Brothers Discovery, which Netflix wanted at one point. And they seem to be in that auction. Now they're out for sure. What do you make of Netflix getting punished?
I got this wrong when I saw Ted Sarandos and the head of... oh gosh, I'm blanking her last name. Bella, love, super impressive woman who oversees a $17 billion content budget. And I said to them, you know, you dodged a bullet here. You've now got $120 billion dollars to go, you know, acquire Disney or massively increase your content creation calendar and the stock has just plummeted. Which caught me off guard. I think that essentially this isn't about Netflix's underperformance. It's about that this indicates what I believe is just a structural shift in the way we consume content and the subsequent shareholder value that's able to be captured. Specifically, their problems can be summarized in two words. The first is you and the second is tube. YouTube is now the most important media company in the world, doesn't make any content. It commands 14% of US TV usage. I mean, think about what YouTube's done. They've built the world's largest studio, but managed to outsource the payroll to 20 million creators. I mean, this business model is just... it's very hard to compete with. And you want to talk about a decline in fortunes. Netflix has lost more market capitalization from its high than Paramount is paying for all of Warner Brothers Discovery twice over. This is crazy. The market, while we're all obsessed with the Ellisons and Warner Brothers Discovery and Rob Bonta announcing he's running for governor with this pyrrhic, stupid regulatory theater of trying to like block them, all that distraction, the market just erased two Hollywood studios from Netflix's market capitalization. And ours are up 2% but content spend is up 10%. So that's a negative arbitrage. When you spend 10% more to get 2% more attention, your attention arbitrage is negative, right? And then what you have is 58% of Gen Z spend more time on social video than streaming. So the competitor here isn't Disney Plus. It's a 19-year-old with a ring light. And streamflation, you mentioned that word. It's kind of like bundle recidivism. We cut the cord to avoid... I for some reason I ended up paying $300 for my cable bill in New York, but we've rebuilt the bundle one app at a time with worse user interface and forced four price hikes in a year and it seems to have hit a wall. I've always believed these guys have pricing power, but what it may be is that it's like a restaurant raising prices as the room empties. And I still think Netflix has probably the strongest management team in what I'd call traditional media, but there is a structural shift that they can't... I don't care if they come up with the next K-pop Demon Hunters or whatever the next hit is. And the way we consume media is moving towards a model of shorter form content with a host with millions of creators who all have their own trailer, their own production values. It's just such an unbelievable model to figure out a way to get other people to pay for your content and you just put a thick layer of innovation on top of it. And again, my idea, and I pitched it to Ted Sarandos three years ago, was something called NetVibes. And I said, take the 98% of your content that gets 2% of the watch time. You know, it's a hit-driven business and make it open source and let creators slice and dice, add different music, create different storylines, and then repost it. But they need to do something that feels more YouTube and TikTok because I think going to the hits of trying to come up with the next Game of Thrones, I think that's going to be a tough one.
I have long felt that traditional streaming is just a terrible investment for a lot of the reasons that you describe and you know this about me. I've said on the podcast, I mean, I've been bullish on YouTube for years now. Because it has this very different identity. Its genetics are very different from Netflix in that it benefits from network effects. It is in a lot of ways a user-forward social media platform where they, as you say, they're not paying to create all of the original content. The users are doing all of the original content for free and all YouTube has to do is sit there and make sure that their algorithm works. And by the way, their algorithm is excellent. And I think that is a big reason for why a lot of people are watching on YouTube. And we're users or creators on the platform. It works for us. I mean, we have invested significantly in YouTube and it pays off for us. We're increasing our downloads. We're increasing our views. We're still able to monetize that. And so the YouTube model works for us. And yeah, we pay a pretty significant cut on the AdSense revenue, but it still works for us because we're monetizing in video ads at the same time. So to me, I think YouTube has just crushed it on every level. And the way I think about streaming, I don't see any moats in traditional streaming aside from having better, more original content. And to me, that is an almost impossible moat to operationalize. So, I've long felt we should only be investing in these companies at valuations that reflect that lack of moat. I think that we should be demanding significantly lower multiples. And I'm going to take a semi-victory lap here because last year I officially realized like Netflix was overvalued. And I don't know if you remember this, but there was that article that came out that Netflix was internally talking about how they wanted a trillion dollar valuation. And I don't know if you remember what happened after that, but the stock ripped because suddenly investors were like, oh my god, look how ambitious the management at Netflix is. They want to go for a trillion. What does that mean? What does that say? I was looking at the stock at $120 per share in July of 2025. Here is what I said about it. Netflix is now valued at roughly the same multiple as Nvidia and a higher multiple than Apple and Google and Meta. But Netflix, unlike those companies, isn't diversified. It doesn't have a hardware business or an ad empire or a cloud platform. It has one product, streaming. And in that world, it's even being outcompeted where it matters most, time spent. In the past year, YouTube has increased its total share of US streaming views by roughly 3 percentage points. Meanwhile, Netflix's share actually declined slightly, and
Now we're trading at $70 a share. So, it's come down basically 40% since we put that episode out. I think the question now is like, has it been punished enough? I mean, we're looking at 22 times trailing earnings. There are other banks that are actually overweight. Evercore, their price target is 110. BMO's price target is 135. The average on Wall Street now is 94. So that would imply more than 30% upside from here. So, you know, maybe now's the time. My personal view is I think that it still has room to come down. I just, I'm not excited by this business. And I just think it's such a tough business to be in. The churn rates, the fact that you have to spend all of this money on original content, the fact that they're not benefiting from the network effects that YouTube clearly is. I just don't see them in a structurally sound position to grow in the way that Wall Street wants them to.
So, what I sense in your comments is what I suffer from, and one of my biggest flaws as an investor is no matter how cheap something gets, I think it's going to get cheaper. I look at it, the stocks get cheap because they're facing structural or cyclical headwinds and you think, "Wow, it's going to get cheaper." I didn't want to buy a house in Delray Beach because I'm like, "Oh, a recession is coming," and my partner forced me to buy it and it's tripled. You know, it's just, it is very hard to pick the bottom. The reason why I'm actually looking at Netflix stock is that you always got to look at valuation. You basically made the case of like, look, it's a great business and it's overvalued. It's trading like a growth software company and it's not, and it's more vulnerable than the valuation would imply, and you were right. The stock's almost been cut in half since then. The multiple has compressed from 12 to six times sales and it's essentially one of the best media companies in the world, or arguably the best media company in the world, if you think of media companies actually creating content, and it's trading like a cable company.
And more broadly, I think of Netflix as the best-run company that is essentially the operating system for entertainment, and that is, it is the home screen for so many TVs now that they just have so much influence. When I heard they were getting into the podcasting business, I thought, okay, how's that going to impact us? Because effectively, any podcast they put on their home screen becomes one of the 10 biggest podcast companies in the world. And similar to Apple or Instagram's become an operating system, they are kind of the starting point or the homepage for entertainment. They have an incredible management team and an incredible content machine. They're going to have to do something. They're going to have to come up with some sort of product innovation around the clippable economy or clip economy, whatever you call it. Their ad sales business has been stronger than I think I'd anticipated and is now, I think, responsible for a large portion of their signups at a lower cost.
Yeah, that was a good move. I just don't think you want to bet against this management team and those 350 million households that start their relaxation time on their home screen. I'm actually quite bullish, I think, on Netflix right now.
Okay. I like it. We disagree, but I see your point and I think it's fair. Do you think it's got further to go down?
I'm not super confident, but what I know is that I don't want to buy it.
I just, I don't like the long-term prospects of the company. I could see, but you know, I don't think that it's got much more. I don't think it's going to increase significantly this year. I'll say that. Maybe we can check in at the end of the year.
But the more interesting conversation is, can you link your bearish sentiments on Netflix to the fact that your parents don't love you?
I've been waiting for several minutes for an opening there. There are all these internal biases that I need to figure out before I start assigning price targets. Oh, trust me, boss. You're going to need a bigger boat. When I try to suss out all the dysfunction in my life from the bad decisions I make, that is a long walk through a crowded forest. Maybe I need to go to therapy before I start talking about stocks again. Maybe that's what that...
I went out to dinner last night. I'm in Aspen and I'm walking home and there's a bear and I honestly, I had to ask myself, have I finally lost it? Am I hallucinating? It's just like, is this that moment where they take away my driver's license? And...
That's even scarier than thinking it's a real bear. That's a terrifying thought.
That's what I thought. I thought, "Okay, is that really a bear or have I just lost it?"
There's bears everywhere all over this town right now.
I'm so glad it wasn't an illusion. Just the final comments here. We're about to see a different world in media because Paramount is going to buy Warner Brothers Discovery here. Because we saw this Paramount settlement, essentially David Ellison won. I am just...
Yeah. Define "won." Talk about the dog catching the car. Anyways, go ahead.
That might mean something for Netflix. I think you made an interesting point, which is your point to Netflix was like, "Okay, now you have like a hundred billion dollars to spend on something else." I think that one of the reasons they've been punished so much is because investors hated what seemed like a lack of ideas from Netflix and the fact that they lost in a battle that they wanted to pursue. I think investors said, "What? Why are you doing that? We thought that you were so confident that you're going to become a trillion dollar company and now you want to go spend $100 billion trying to buy Warner Brothers Discovery. What does that say about your vision for the future?" Probably nothing good. But these things are all related. Paramount, they're going to merge. So, how does that change things for you, if at all?
I don't think Netflix's competition is Warner Brothers Paramount. I think it's YouTube. And first off, Rob Bonta trying to block this thing is ridiculous. All of a sudden, he's decided he's Lina Khan and he should be evaluating. And my favorite was the settlement. Have you, did we talk about this? They have to put together an editorial board.
You and I did not talk about it, but talk about it because it's ridiculous.
Well, I want to announce that Prof G Media is putting together an editorial board of Leia, my Great Dane, who will have more impact and influence on my editorial decisions than this board. He said, "You can't sell your two lots." That's socialism. Owners get to decide and companies get to decide whether they buy and sell. There was no reason to block this merger. If he had blocked this merger, Paramount would become a distressed asset, probably sold for parts. I mean, CBS News has no future as an independent company. Just producing quality journalism, which CBS mostly does, is a terrible value proposition. And it doesn't matter how good LMAN is, this is now a business of scale. Warner Brothers Discovery is a great company with incredible IP that would have been fine, but it didn't have much of a future. These guys need to bulk up against an already bulky Netflix and the bulkiest of the bulky YouTube. So that was ridiculous regulatory theater trying to get in the way of this merger and asking them, my favorite was, "We want you to make more movies. Guaranteed to make more movies." Well, okay, that's like if JP Morgan and Goldman, do you force them to have more ATMs? Maybe they shouldn't make more movies. And also, they're allowed to fire people. Well, that's part of capitalism. So, I think that was total BS.
